Dubai: Saudi Arabia on Tuesday unveiled its 2019 budget, revealing a record high spending plan of 1.11 trillion Saudi riyals ($295 billion; Dh1.07 trillion), targeted at boosting the country’s growth.
The government expects revenue to increase by more than 9 per cent to touch $260 billion against a projected deficit of $35 billion.
Figures in the budget, the kingdom’s biggest ever, reveal the government expects to earn more from oil next year.
Analysts said such an expectation is highly optimistic in the context of current market dynamics.
A look at the numbers suggests that kingdom will require oil prices in excess of $85 (Dh312.21) a barrel to balance the budget.
In recent weeks, oil has been on decline, hitting a 14-month low on Monday.
West Texas Intermediate, the benchmark US crude, dropped below $49 a barrel on Tuesday, while Brent, the global benchmark, dipped to $58.60 per barrel.
The assumption of higher oil prices is widely seen as a departure from the thinking around previous budgets. Last year, Saudi Arabia based its 2018 budget on crude prices averaging $63 a barrel.
Brent, however, is on track to average $72 this year, helping the kingdom reduce its deficit substantially.
Ministry of Finance data for the period running up to the third quarter revealed a narrowing of the kingdom’s budget deficit — from 34.3 billion riyals in the first quarter to 7.36 billion riyals.
Gains in government revenues, largely driven by higher oil prices, have helped the kingdom narrow its deficit from earlier forecasts, according to economists.
While the higher spending plans are expected to boost growth through investments, analysts fear a big surge in current expenditures will continue to shadow growth prospects as the government plans to spend a substantial amount of money on annual bonuses, higher salaries and the continuation of cost-of-living allowances to state employees.
King Salman ordered the cost-of-living allowances to be continued ahead of the budget announcement on Tuesday. According to a royal order published by the state news agency SPA, civil servants and soldiers will continue to receive a monthly allowance of 1,000 riyals ($266). Allowances will also continue for pensioners and social security recipients, and student benefits will increase by 10 per cent.
Economists said that while the higher incomes for salary earners are expected to boost overall consumption, the government’s current expenditures will work against long-term growth and the effectual managing of the deficit.